Introduction
“An ounce of prevention is worth a pound of cure" (American proverb) In occupational safety and health, prevention – the practice of stopping an unwanted event from happening – usually refers to measures taken in the workplace to keep workers healthy and safe. Accident insurance providers, public institutes or other OSH stakeholders frequently try to improve the effectiveness of such measures by offering strategic programmes, economic or other incentives, and practical support. Such steering approaches must be sensitive to the framework and circumstances set by the national workers’ compensation system (WCS).
Models of worker compensation systems
Worker compensation systems (WCS) are usually part of the social benefit or social security schemes of the EU Member States. The purposes of the different WCS are always the same. They were introduced to establish a system which insures workers against the impairment of work-related injuries and, at the same time, relieves the employers from their financial liability. In this way WCS contribute substantially to social peace and stable markets.
However, the details of each WCS are different with regard to organisation, funding, coverage and membership. Principally there are two traditional schemes for social security and for worker compensation. A detailed description of different schemes and compensation systems can be found in the OSH Wiki article International comparison of occupations accident insurance systems.
- The Bismarckian scheme, named after Otto von Bismarck, the chancellor of the German Reich who introduced the first social insurance scheme in the 1880s. Bismarckian social insurance is mainly financed by contributions from its members. In the case of worker compensation the members are the companies (employers).
- The Beveridgean scheme, named after William Henry Beveridge, who issued a ground-breaking report on “Social Insurance and Allied Services" to the British Parliament in 1942. In practice, the social insurance schemes in EU Members States following the Beveridgean tradition are mainly tax financed.
- The models can also be clustered by considering cultural heritage and the political nature of the welfare system: In this way we can distinguish between three (or four) models, those being the Anglo-Saxon (market oriented) welfare state, the Central European (Bismarckian) welfare state, the Scandinavian (social-democratic) welfare state, and the Mediterranean / Eastern European models, which are either described as hybrid (combining attributes of the first three) or as still developing systems.
As EU-OSHA stated in its report[1], some EU Member States combine elements of the two basic models. Furthermore, cultural and societal elements play a decisive role. Moreover, within each of the two general schemes, insurance for occupational accidents and diseases can be offered by public (monopolistic) institutions or by private (market oriented) providers[2]. Most worker compensation systems grant benefits for material damages (damage compensation in contrast to compensation of immaterial damages due to suffering) and for reconvalescence and rehabilitation due to work and travel accidents, regardless of questions of worker negligence. There are bigger differences with regard to compensation for occupational diseases: usually they are specified on an approved list of occupational diseases, and the worker is only compensated when a clear link between the disease and the particular type of work can be proven[3]. The OSH Wiki Article International comparison of occupations accident insurance systems provides a detailed overview.
Prevention and worker compensation
Mandate for prevention
Prevention, in its most basic sense, can be defined as the practice of stopping, or making impossible, an unwanted event. In the case of occupational safety and health, the event can be any situation that could lead to work-related ill-health (accidents, sick-leave). In the European legislative framework, the general responsibility for prevention at workplace level is assigned to the employer. Article 5 of the OSH Framework Directive 89/391/EEC[4] states that “The employer shall have the duty to ensure the safety and health of the workers in every aspect related to the work". In reality, prevention is not a standalone act carried out by one sole responsible party. The mandate for supporting OSH prevention measures can be with national or regional authorities, as well as accident insurance providers. The mandate can be explicit, implicit, be covered by the general membership or insurance premium, or simply allow the insurance provider to offer services on the “prevention market"[5] .
Models of economic incentives and prevention
In various EU Member States, OSH policy makers and accident insurance bodies try to improve prevention measures at workplace level by offering economic incentives. Different methods exist, and a distinction can be made between direct and indirect economic incentives. Direct economic incentives range from insurance premium variations, tax incentives, to funding schemes that immediately improve a company’s OSH performance or help them to invest in new prevention measures. Indirect economic incentives can be prevention programmes that provide publicly subsidised services, thus allowing companies access to certain occupational services below market prices (e.g. implementation and certification of OSH management systems).
Some of the different economic incentive schemes depend on the national worker compensation system. Another distinction can be made based on who offers the incentive programme: Is the incentive related to the insurance system and offered by an insurance provider (e.g. premium variations, funding schemes), or is it part of a national policy (e.g. tax incentive, public subsidies)[1][2].
Additional models aimed at stimulating prevention in companies are strategies, programmes and prevention campaigns that are set up and carried out by the government or other OSH stakeholders.
Insurance-related economic incentives
Insurance premium variations
Insurance premium variations are used in several countries with a premium financed or ‘Bismarckian’ social insurance system. In some countries they are already integrated on a collective basis in the general premium calculation system, e.g. in Germany, where companies are categorised in risk classes.
To be considered as a genuine incentive, premium variations should work on an individual basis, i.e. a company profits from their own good OSH performance and pays less than those who perform badly and more in case of poor OSH performance (bonus-malus system). Examples can be found in the German sectors of raw materials and chemical industry[6]and in the food and catering sector[7]. Other insurance systems operate with risk classes for sectors and activities. Those cannot be considered as incentive-based because the individual approach is lacking. To offer individual incentives, insurance providers usually set up individual accounts to monitor the OSH performance of companies over a number of years for adjusting the general premium calculation. In this way, annual extremes that particularly affect small and medium enterprises (SMEs) are evened out[1].
Insurance premiums may also be differentiated based on prevention efforts. In Italy, the National Institute for Insurance against Accidents at Work (INAIL) is leading a "Swing for Prevention" campaign (Oscillazione per prevenzione), whereby employers who implement interventions related to health promotion in the workplace are eligible for a discount on insurance premiums[8].
Funding schemes
Funding schemes are not very common among insurance providers, but there is a growing number of insurances interested in such incentives schemes. Member companies can get funding or re-financing of prevention measures. Some funding schemes are linked to prevention campaigns or limited to the prevention of specific (sectoral) risks. An example is the catalogue with subsidies offered for specific products or measures offered by the German insurer for the construction sector (BG Bau[9]). There are also examples where funding schemes are used solely as incentives or in addition to premium variation models. Instead of immediate monetary funding, insurance providers may also make use of subsidised services for their member companies (e.g. Austrian social insurance institute AUVA)[1].
Aspects of how insurance-related incentives are applied
All the models of premium variation systems have something in common; namely that they can only be applied in a premium based compensation system which is financed by the contributions of the companies. This is the case in a ‘classic’ Bismarckian social insurance system with a single monopolistic insurance institution (or sector-specific insurance bodies) as well as in a private market based insurance system, with various players.
However, in systems based on free markets, competitors have to consider some structural adjustments. While monopolistic non-profit insurance bodies also usually have the public mandate to invest in prevention, private insurance providers always have to prioritise economic interests[10]. Furthermore, investments in safety and health may pay off in the long run, but, in a free market insurance system, companies are free to change their insurance provider in the short term. Especially with regard to funding schemes, this may lead to a situation where one insurance provider invests in the improvement of the safety of its members, only for another provider to profit when the company decides to switch[2].
Some countries with a private insurance system have therefore set out a prevention mandate for private insurance companies. Furthermore, they have established a common funding system, which can be commonly financed by all private insurance companies. One example is the Finnish Work Environment Fund (Työsuojelurahasto). The fund receives 1.7% of the insurance premiums of the employers. With this budget, the fund supports research and development projects, as well as the transfer in Finnish companies[11].
Publicly funded prevention incentives
Tax variations
Tax variations can be any kind of tax reduction granted to companies with an above-average OSH performance, or to companies that invest in order to stimulate prevention. In contrast to insurance-related incentives, tax incentives are offered by the government. For instance, Germany introduced in 2008 a tax measure providing employers with an exemption for health and well-being expenditures up to € 600[12]. Another example is the bonus campaign in Spain targeted at the construction sector. Launched in 2010, construction companies can apply for a reduction of their social security contributions if they can demonstrate a significant and verifiable reduction in their accident rate[13].
Public programmes, funding and subsidies
Setting up strategic programmes for prevention is more typical for a government measure. All EU Member States have a national strategy for safety and health at work, aimed at reducing the accident rates and cases and severity of work-related ill-health. The national strategies are linked to the EU OSH Strategic framework. A description of each national strategy and the EU strategy is available in the OSH Barometer[14].
Depending on the national landscape and political system, the strategy may be a single actor or a multi actor strategy. In systems with monopolistic insurance institutions (typically Bismarckian systems), such institutes often participate in the strategic planning and in the operation of programmes based on the strategy. The main actor of the strategy is often a central public institution, for example the national labour inspectorate or the national institute for safety and health at work. The composition and level of involvement of other stakeholders such as social partners or professional organisations varies significantly between the EU Member States[15].
As well as strategic measures, public bodies often offer further funding and subsidies for individual activities. Such targeted interventions are often limited in time which makes it difficult to sustain them when the subsidy ends[16]. Furthermore, unlike tax credits, they are often only available to a limited number of recipients and are thus more exclusive and limited in scope[8].
Subsidised public services that offer the introduction and certification of OSH management systems are very common, as are training measures or individual management consultation. Such measures are offered by public inspection services as part of their general portfolio[1].
Relationship between strategic planning and worker compensation systems
The strategic planning of publicly funded prevention activities or insurance services depends on the precise analysis of statistical key numbers or burden of costs on social systems. Typical key indicators are absolute numbers of accidents, accident rates, occurrence of work-related diseases and sick leave days due to certain diagnoses. The burden of costs expresses the total compensation sum that insurance bodies or social systems have to cover in order to compensate the workers due to the statistical numbers.
In order to provide effective prevention at the workplace level, services rely on precise statistical analysis. However, in practice, statistical analysis and evidence in each EU Member State is heavily influenced by the compensation system itself. It is a well known fact that in some Member States reporting rates tend to be low in comparison to others. A report on the phenomenon of under-reporting of accidents at work confirms that under-reporting varies greatly from country to country, from less than 10% to almost 100%[17]. There are various reasons for this phenomenon:
- In general, some authors see a difference between countries where accidents are reported to the labour inspectorate (high level of underreporting) and reporting to insurance providers (low level of underreporting). Also national practice in collecting data can have a significant influence[18].
- Other reasons for significant underreporting are seen in the lack of motivation to make a report on occupational accidents and illnesses by employers and physicians due to unlikeliness of compensation, specific cultural habits and sectoral customs (“tough guys"), or societal lack of attention.
- The benefits granted can also stimulate or hinder reporting of work-related accidents: In Sweden and the Netherlands, the fact that work accidents and private accidents allow for the same treatment and compensation is thought to have lead to substantial underreporting, as the registration of work accidents would lead to additional administrative burden. In contrast, in Germany, work and commuting accidents allow for better medical treatment and additional rehabilitation measures by the accident insurance (in comparison to the benefits covered by the public health insurance). In this way both, the worker and the physician have an interest in the registration of work accidents. More details are provided in the OSH Wiki Article International comparison of occupations accident insurance systems.
The effective prevention of occupational diseases is dominated in practice by the burden of costs caused by the occupational diseases on the social security system. The burden is dependent on a) the list of occupational diseases in the respective country (if available) and b) the recognition practice executed by insurance institutions and the jurisprudence. Both factors, the legal framework set up by national lists of occupational diseases and the recognition schemes, can highly influence and even impede an analysis of the real situation of work-related illnesses. Therefore, a low number of recognised cases of an occupational disease in a country is not necessarily a sign of absence of such a disease or evidence of successful prevention. In addition, well-functioning detection systems or large-scale information campaigns may explain the high number of reported and recognised cases in some countries[19]. These inaccuracies in statistics, as well as the national practice of recognition of occupational diseases and resulting burden of cost on the national social system, can possibly influence the political decision of setting priorities in strategic planning.
Contribution of incentive models to prevention and aspects of measurability
Insurance based incentive schemes
The core argument of promoting insurance based incentives measures is that they are more flexible and more cost effective instruments compared to regulation[20]. Therefore, the effect of incentives on prevention activities at workplace level has been the subject of various evaluation studies. In general, there have been studies that indicate that insurance-based prevention programmes are effective in reducing accident and sick leave rates[5] [21] . Cost-benefit calculations even show that incentive schemes pay off for both, accident insurance providers and member companies[22]. However, there are methodological barriers and, in some cases, political interests that prevent the effectiveness of incentive schemes from being scientifically evaluated[20].
With regard to insurance-based funding schemes and premium variation schemes, there are indicators for certain schemes that demonstrate a high probability of efficiency. The former German social accident insurance institute for the butchery sector (Fleischerei-BG, now merged into the German social accident insurance institute for the foodstuffs and catering sector, BGN) carried out an analysis of the their own funding schemes that indicated that companies that frequently participated in particular funding schemes showed a steadily decreasing number of accidents[23]. In addition, an overall analysis of various funding schemes revealed a positive correlation between the number of accidents and the reimbursement rate[1]. However, a common problem is the attribution of a direct link between effects and funding[23] [24].
Furthermore, there seems to be limitations to the various forms of bonus systems (including funding schemes and premium reductions): So called ‘free riders’ take the bonus but would have invested anyway. A ceiling effect takes place – i.e. at a certain point the investments in the companies is greater than the benefit, and the efficiency of funding, bonuses and subsidies decreases.
Tax incentive schemes
Surveys and evaluation studies on tax incentive schemes throw doubt upon the effectiveness of such incentives. In the evaluation of the now discontinued FARBO tax incentive scheme, the Dutch institute TNO highlighted the fact that the scheme was not cost-effective, as well as the fact that 83% of the companies stated they would have invested in prevention anyway, without a tax incentive[25]. However, the answers may have been influenced by a social desirability effect, i.e. that most employers wanted to demonstrate that they care about their workers’ welfare regardless of the economic incentive. The evaluation also showed that the Dutch subsidy programme for investments in new OSH-friendly machinery and equipment led to better working conditions in 76% of enterprises[1].
The Spanish bonus campaign in the construction sector had processed over 250,000 applications by 2019[13]. In spite of this large number of applications, overall participation remained relatively low. Only 0.68% of the total number of companies in Spain applied for the incentive in the first year. By 2018, the number of applicants had risen to 3% of all active companies in Spain that year. In 2019 the campaign was suspended. The fact that participation in the scheme was voluntary may partly explain the relatively low number of applications. Another explanation is that the scheme was more attractive to large than small companies, which constitute by far the largest group of construction companies. The financial incentives offered by the scheme were limited to a maximum of 5-10% of an employer's total annual social security contributions. The larger the company, the more it could benefit from the scheme, which meant that larger companies had a greater incentive to apply than smaller companies[13].
The German tax incentive scheme was evaluated by IGA (Initiative Gesundheit und Arbeit) in a survey among enterprises and health insurance workers. On the one hand the main criticism was that the scheme does not offer substantial new possibilities to companies to save taxes and therefore does not set a real incentive for investing in safety and health at work. On the other hand the tax incentive is seen as a positive signal by many enterprises because it increases the importance of workplace health promotion. Generally the possibility to deduct health promotion measures from tax was regarded quite positively by the enterprises.
Obviously the success of such measures depends to a great degree on how exactly they are designed to the need of the target groups. Nevertheless, tax incentive schemes are often used policy tools by governments, notably to support the green transition. For example, France has set up a tax incentive scheme to facilitate cycling to work[8].
Publicly funded prevention programmes
The mere fact that every EU Member State makes use of strategies and programmes shows the importance of such measures for prevention, regardless of the worker compensation system. Evaluation is habitually part of strategic planning and all countries have included monitoring processes. A comparative study from EU-OSHA on the national strategies[15] indicates that the more recent national strategies follow a less ‘optimistic’ and more ‘realistic’ approach. Very advanced or ‘optimistic’ goal setting in earlier strategies was widely replaced by a more ‘humble goal setting’ approach, accompanied by specifically defined activities, including monitoring, reporting and evaluation measures[15].
It should be mentioned that what has already been said about methodological barriers and political interest regarding economic incentives also applies to strategic and public prevention programmes. Despite the fact that they are absolutely necessary, those studies seldom stand the test of methodological accuracy when confronted with public mandates and political interests. There are conceptual barriers due to the obligation of ethical behaviour of public authorities1 as well as biases among the participants due to social desirability[20]. Because of these difficulties, statistical effects could not always be attributed to political or strategic measures.
